Brazilian biscuit market: An ongoing consolidation process

May 12th, 2014

Brazilian biscuit market – cookies and chocolate coated biscuits are expected to produce the best performances by 2018 in Brazil, with the whole category undergoing a consolidation process. The increasing purchasing power will have consumers look for more sophisticated products, as well as valuing quality and healthier choices.

Although approximately 600 companies still make up sales, the biscuits category in Brazil is, according to Euromonitor International undergoing a consolidation process with strong regional brands. Additionally, the category experienced relative volume stagnation between 2008 and 2013 due to high penetration of biscuits in Brazilian households. As a result the main players have been obliged to opt for merger and acquisition strategies in order to increase their sales.

Companies such as M Dias Branco and PepsiCo have been investing in acquisitions, while local regional manufacturers such as Cipa and Indústria de Alimentos Bomgosto have become targets thanks to the success of their local brands.
On the other hand, despite stagnating volumes biscuit manufacturers are also investing in added-value products in order to increase their value sales. While cookies and chocolate coated biscuits are the most successful categories in value sales, companies are focusing on health and wellness products as well as smaller portions to attract new consumers. By offering more premium products but in smaller quantities, brands are maintaining a balance within consumers’ expenditures. With increasing purchasing power, especially among lower- and middle-income groups, innovation, sophistication and new product launches have become key success factors in the biscuits category.

Increased unit prices drive value sales

The biscuit category 2013 volume and value growth resembles the growth seen between 2008 and 2013. While volume sales are stagnating, value sales are growing due to an increase in unit prices. The main explanation comes from the increase in unit prices due to the rising cost of raw materials, particularly wheat, impacted by the US dollar exchange rates. As a result, manufacturers have to think of new strategies and approaches to boost the category.
The cookies category saw the fastest growth in 2013, increasing by 13% in volume and 19% in value terms, boosted by the success of added-value products, new product launches and the fact that the category is much smaller than more traditional and successful biscuits, such as savoury biscuits and crackers, plain biscuits and sandwich biscuits. One of the biggest recent launches in cookies is Toddy chocolate chips, one of the main investments of PepsiCo in 2012-2013.

Best performers by 2018: Cookies, chocolate coated biscuits

While volume sales of biscuits will remain relatively stable by 2018, increasing by a 3% CAGR (compound annual growth rate), Euromonitor International experts predict that manufacturers will continue investing in value-added products in order to boost value sales and increase profit margins. Innovative and premium brands will increase their shares as consumers gain purchasing power and therefore opt for more sophisticated products. Smaller categories such as cookies and health and wellness biscuits with higher unit prices will gain shares over the forecast period as consumers value quality as well as healthier products.
In the same way as seen between 2008 and 2013, cookies and chocolate coated biscuits are expected to produce the best performances, according to Euromonitor International, increasing at respective volume CAGRs of 9% and 5% and constant value CAGRs of 12% and 7% by 2018. Both categories will benefit from low penetration rates compared to other categories and the fact that manufacturers are investing in new product developments in these specific categories as unit prices are higher, as are profit margins.
The high number of manufacturers involved in the biscuits category and relative stagnation of volume sales will automatically reinforce the consolidation process already started by the category’s main players. Companies such as M Dias Branco, Kraft Foods and Pandurata will continue targeting smaller local manufacturers in order to benefit from their regionally strong brands, production capacity and distribution in more remote or less explored areas.